Beverly Maltbie doesn't want to move, but she's afraid that she might have to.

The 68-year-old grandmother lives in Glenwood Manor, a 60-unit apartment building for low-income elderly and disabled residents in northwest Corvallis. Rents are subsidized by the U.S. Department of Housing and Urban Development under the Section 8 program.

A few weeks ago, the tenants received notice that the building's owner intends to opt out of the Section 8 contract in a little more than a year.

"I tried not to believe it," said Maltbie, who's lived in Glenwood Manor for more than six years. "I really was hoping that for some reason it was not true because I wanted to stay here for the rest of my life."

Glenwood Manor was part of a wave of subsidized housing projects built in the 1970s and '80s all across the country. Developers received HUD financing at attractive terms in exchange for participating in the Section 8 affordable-housing program.

People who qualify for the program pay a portion of rent and utilities, usually 30 to 40 percent of their monthly income. The local housing authority pays the balance of the rent directly to the landlord.

But now many of those 30-year HUD mortgages are being paid off, giving property owners the option of converting their buildings from subsidized housing to market-rate rental units or condos.

That's the option Glenwood Manor's owners are considering - but it's far from a done deal, said Howard Liebreich of Lee Pacific Properties, one of more than 30 investors who teamed up to buy the building about 20 years ago.

"That doesn't mean we will necessarily opt out," Liebreich said. "But in order to protect our rights, we have to send a letter."

Operating a subsidized housing project is no picnic, Liebreich said. There are burdensome state and federal paperwork requirements, the property is inspected on a regular basis, he's held to government maintenance standards, and HUD sets the rents.

"We're basically stuck between a rock and a hard spot," Liebreich said. "We haven't had a rent increase since 1996."

For now, the rent for Glenwood Manor's 60 one-bedroom units is capped at $613 a month. Liebreich and his partners are having a rent comparability study done to determine what current market rates might be, and they'll present that information to HUD with an eye to getting a rent hike.

"If the rents are acceptable to us, we're not going to opt out of the program," Liebreich said.

So where does that leave the tenants?

Well … that depends.

Because they're currently living in a Section 8 building, they should automatically receive individual Section 8 vouchers to use at another rental. But not all landlords accept the vouchers.

Theoretically, the Glenwood Manor tenants could stay right where they are. But if the owner raises the rent above what HUD considers market rate, the vouchers won't be honored there.

"What we try to do is to minimize the disruption to the tenants," said Lee Jones, a spokesman for the federal agency. "That's our first priority."

But HUD must also be responsible in spending taxpayer dollars, he said, and that means holding the line on rents.

With the generally tight rental market in Corvallis, taking Glenwood Manor market rate might seem like a no-brainer, but the decision isn't necessarily that simple. For one thing, the 30-year-old building would be competing for tenants with newer complexes in nicer neighborhoods. For another, it couldn't count on the 100 percent occupancy rate it enjoys now.

"The basic calculation for the owner, when all is said and done, is revenue stream," Jones said. "And in some sense, when you go market rate, you put yourself at the mercy of the market."

State and local housing officials are keeping a close eye on the Glenwood Manor situation.

There's a limited number of HUD-subsidized housing projects in Oregon, and the 30-year mortgages that lock them into the Section 8 program are beginning to expire, said Marlys Laver of Oregon Housing and Community Services.

"Our bond-financed portfolio was originally 122 apartment projects around the state. They began expiring in 2007, and by the end of 2013 all of them will have expired. They will either renew or opt out," Laver said.

"We've been pretty successful in getting owners to renew, but in some cases the owners are opting out."

The situation is particularly acute in Linn and Benton counties, where demand for subsidized housing far exceeds the supply.

"We serve over 2,400 families in the two-county area," said James Hackett, director of the Linn-Benton Housing Authority. "We have about 1,600 families on our waiting list that we can't serve now."

Many of the people who qualify for government housing assistance are working full time, Hackett said, often doubling up with another family to make their rent dollars stretch. And the current economy isn't helping matters.

"As people pay more for other necessities such as gasoline or food, that's going to make the housing crisis worse," he said.

Losing Glenwood Manor, of course, would make a tight Section 8 housing market even tighter.

"Then those tenants would have to find housing elsewhere, and that eats into our affordable housing stock," Hackett said.

"We lose a certain amount of capacity each time one of those projects opts out."

Bennett Hall can be reached at 758-9529 or bennett.hall@lee.net.